Is Precipio a good diagnostic and research action to invest in?
While Precipio (PRPO) is a lesser-known company in the diagnostics and research industry, it generated significant market buzz in May 2021 when its COVID-19 antibody test became available on the platform. form of Amazon (AMZN). However, can the stock continue to grow based on the antibody test? Let’s find out.
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With a market capitalization of $ 76.53 million, Precipio, Inc. (PRPO) in Palo Alto, Calif., Is a cancer diagnostics and reagent technology company that provides diagnostic products and services to the market of the ‘oncology. Its HemeScreen technology was adopted by American Oncology Network, LLC in August 2021. In addition, its shares soared to their record price of $ 9.18 in 52 weeks on May 4 due to investor optimism regarding the launch of its rapid COVID-19 antibody test on the Amazon.com, Inc. (AMZN) trading platform.
However, the stock has lost 35.8% of its price since hitting its 52-week high to close yesterday’s trading session at $ 3.37.
PRPO announced a new Marketplace Agreement (ATM) on April 5, 2021, which is expected to be its primary method of funding. In addition, its current trading volume is 395,993, while its average volume is 1,577,112, indicating reduced liquidity. In addition, the company’s losses widened in the second quarter. Thus, the short-term outlook for PRPO looks bleak.
Click here to view our health sector report for 2021
Here is what we believe could influence PRPO’s performance in the short term:
Limited use of COVID-19 antibody test
PRPO received Emergency Use Clearance (EUA) from the FDA for its COVID-19 IgM and IgG serological antibody test last year. However, the FDA reiterated that antibody tests could help determine whether a person has been exposed to the SARS-CoV-2 virus, but it does not determine whether one has developed immunity to the virus.
Tim Stenzel, MD, Ph.D., director of the Bureau of In Vitro Diagnostics and Radiologic Health at the FDA’s Center for Devices and Radiologic Health, said on May 19, 2021: “Antibody testing should not not yet be used to determine immunity or protection against COVID-19 at any time, and especially after a person has been vaccinated against COVID-19. Given that 74.2% of American adults have already received at least one dose of a COVID-19 vaccine, the demand for PRPO antibody testing could decrease.
Growth in results does not translate into improved results
PRPO’s net sales increased 79.2% year-on-year to $ 2.34 million for the second quarter ended June 30, 2021. Its service revenues, which accounted for nearly 87% of total revenue , rose 26.1% year-on-year to $ 2.04. million. However, its operating expenses increased 18.6% year-on-year to $ 2.88 million. And his net loss amounted to $ 3.01 million, an increase of 34.9% year-over-year. His loss per share was $ 0.14, down from $ 0.20 the year before.
In terms of gross profit over the past 12 months, PRPO’s 26.80% is 51.3% lower than the industry average of 55.01%. Likewise, the stock’s last 12-month EBIT margin is negative compared to the industry average of 3.28%. In addition, its EBITDA margin over the last 12 months and its leveraged FCF margin are also negative compared to the respective industry averages of 6.13% and 0.10%.
POWR ratings reflect grim prospects
PRPO has an overall F rating, which equates to a strong sale in our POWR rating system. POWR scores are calculated by considering 118 different factors, each factor being weighted to an optimal degree.
Our proprietary scoring system also rates each stock against eight different categories. PRPO has a D grade for quality, consistent with its lower profitability ratios than the industry.
The stock has a D rating for Sentiment, which is in line with analysts’ expectations that PRPO’s EPS will remain negative this year and next. It also has a D rating for stability, which is consistent with its beta of 2.64.
PRPO is ranked # 489 out of 506 stocks in the biotechnology industry. Click here to view additional POWR ratings for PRPO (Value, Growth & Momentum).
As PRPO shares hit their 52-week high in May 2021 amid positive sentiment surrounding the launch of its COVID-19 antibody test on AMZN’s platform, demand for testing from antibody should decrease over time. Additionally, the company’s losses have widened despite positive developments on the HemeScreen technology front. And analysts expect PRPO’s EPS to remain negative in the coming quarters. So we think the stock is best avoided now.
How does Precipio (PRPO) compare to its peers?
While it is wise to avoid PRPOs now, one could consider these other stocks in the same industry with an A (strong buy) rating: Takeda Pharmaceutical Company Limited (TAK), Exelixis, Inc. (EXEL) and Sino Biopharmaceutical Limited. (SBHMY).
Click here to view our health sector report for 2021
PRPO shares fell $ 0.07 (-2.08%) in pre-market trading on Wednesday. Year-to-date, PRPO has gained 62.80%, compared to a 21.57% increase in the benchmark S&P 500 over the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in economics in college and has a passion for writing, which led her to her career as a research analyst.
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